Estimate your living expenses for a year.

Divide expenses into two categories: essential and discretionary. Essential expenses are things you
can’t do without, such as food, housing, taxes, health care, insurance, and a buffer for emergencies.
Discretionary expenses, like travel and hobbies, are things you could cut in a pinch. Why this is important.

Take a good look at how your expenses might change in retirement. While some expenses may decrease or go away altogether, you’re likely to incur some new expenses.

Build your main portfolio.

You can invest in a mix of stock, bond, and cash investments according to an asset allocation
plan that’s appropriate for your age, income needs, financial goals, time horizon, and comfort
with risk. The Schwab Center for Financial Research recommends a progressively more conservative
asset allocation plan as you move through retirement.

The allocation to stocks, fixed income, and cash that’s best for you will depend on your
circumstances and tolerance for risk. You may consider starting retirement at no more than a
moderate level of risk and gradually shifting your portfolio toward more fixed income investments
as your retirement time horizon becomes shorter, your risk tolerance declines, and your need for
long-term growth lessens.

Here’s an example of how you might adjust your asset allocation through retirement.

CRSP 6-8 was used for small-cap stocks prior to 1979, Ibbotson Intermediate-Term U.S. Government Bond Index was used for bonds prior to 1976, and Ibbotson U.S. 30-day Treasury bills was used prior to 1978. Results assume reinvestment of dividends and interest. Indices are unmanaged, do not incur fees or expenses and cannot be invested directly. Past performance is no indication of future results. For more information on the methodology for the long-term return estimate calculations, see the Market Insight article “Q&A: Estimating Long-Term Market Returns.”

Past performance is no guarantee of future results. Examples are for illustrative purposes only.

Bank Account

Main Portfolio

Short-Term Reserves

Within your main portfolio, create a short-term reserve.

Sometimes the unexpected happens, and the year of cash you’ve set aside for living expenses may not be enough to cover a needed purchase or emergency expense. We suggest you create a short-term reserve in the cash and cash investments allocation portion of your retirement portfolio, enough to cover up to four years of your retirement portfolio withdrawals.

By investing this cash in liquid investments such as money market funds and short-term CDs, your goal is to have your cash reserve ready if you need it and avoid the possibility of having to sell your investments in a bear market.

You may also consider placing this money in a short-term ladder or, if you don’t want to manage individual investments in a ladder, consider short-term bond funds.

Sources: Schwab Center for Financial Research and “What Role Should Fixed Income Play in Your Retirement Portfolio?” by Rob Williams, February 5, 2010.

Investors should carefully consider information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling Schwab at 800-435-4000. Please read the prospectus carefully before investing.

Investment return and principal value will fluctuate, and shares, when redeemed, may be worth more or less than their original cost.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.

Fixed income investments are subject to various risks, including changes in interest rates, credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors.

Certificates of deposit available through Schwab CD OneSource offer a fixed rate of return, are FDIC-insured, and are offered through Charles Schwab & Co., Inc.

CDs from Schwab CD OneSource are issued by FDIC-insured institutions, and are subject to change and system access. Unlike mutual funds, certificates of deposit offer a fixed rate of return and are FDIC-insured up to $250,000 per depositor per institution, based on account ownership type. Visit fdic.gov for details. There may be costs associated with early redemption and possible market value adjustment.

3. Plan Your Withdrawals

Consider this withdrawal strategy to help keep your annual income steady.

Pay expenses from your bank account.

Withdraw money as you need it for retirement expenses.

You’ll replenish this account with money from your retirement portfolio and any income you receive from predictable income sources like Social Security.

From Schwab Bank

Open an FDIC-insured Schwab Bank High Yield Investor Checking® or Schwab Bank High Yield Investor Savings® account. With unlimited ATM Fee Rebates, these accounts can help you save.

Withdraw interest and dividends from your retirement portfolio.

If you’ve previously elected to have dividends and interest automatically reinvested, turn off this feature and direct the income to your bank account instead.

If dividend and interest income is not sufficient to cover your retirement expenses, you may also need to withdraw a portion of your principal. Continue reading for suggestions about how to do this.

If you’re interested in a dividend growth strategy that seeks to deliver monthly income, annual income growth, and competitive total returns over time, learn more about the ThomasPartners® Dividend Growth Strategy.

Here’s a hypothetical example of a typical year-end portfolio rebalancing exercise.
Let’s assume you’re a retiree with a moderately conservative asset allocation.
You have enough cash set aside for the next 12 months, but at the end of the year you plan to
take $40,000 out of your portfolio. Your portfolio looks like this at the beginning of the year:

Beginning of year

Investments

Taxable account

IRA

Total portfolio

Allocation

Large-cap stocks

$250,000

$0

$250,000

25%

Mid-/small-cap stocks

$50,000

$0

$50,000

5%

International stocks

$100,000

$0

$100,000

10%

Taxable bonds

$0

$500,000

$500,000

50%

Money market fund

$100,000

$0

$100,000

10%

Total

$500,000

$500,000

$1,000,000

100%

End of year

This hypothetical portfolio could grow until it looks like this at the end of the year (assumes
dividends and interest on stocks and bonds are swept into the money market fund in the taxable
account, but then are automatically reinvested in the IRA).1

Investments

Taxable account

IRA

Total portfolio

Allocation

Large-cap stocks

$263,500

$0

$263,500

25.10%

Mid-/small-cap stocks

$54,300

$0

$54,300

5.17%

International stocks

$105,400

$0

$105,400

10.04%

Taxable bonds

$0

$518,000

$518,000

49.33%

Money market fund

$108,8001

$0

$108,800

10.36%

Total

$532,000

$518,000

$1,050,000

100%

The weighted portfolio rate of return of 5% assumes reasonable long-term total return expectations
for a moderately conservative mix of stocks, bonds, and cash. As part of the total return, we
presume that a 2% dividend payout rate on U.S. large-cap and international stocks is swept into
the money market account, but then reinvested in the IRA. This scenario is for illustrative purposes only and cannot predict or project the return of any specific investment or portfolio.

Here’s how you might withdraw $40,000 and at the same time rebalance this hypothetical
portfolio back to your target asset allocation. Keep in mind that selling investments can have
tax implications and you may want to consult with a tax advisor before you proceed.

Investments

Taxable account

Cash out

IRA

Cash out

Total portfolio

Allocation

Large-cap stocks

$263,500

($11,000)

$0

$0

$252,500

25%

Mid-/small-cap stocks

$54,300

($3,800)

$0

$0

$50,500

5%

International stocks

$105,400

($4,400)

$0

$0

$101,000

10%

Taxable bonds

$0

$0

$518,000

($13,000)

$505,000

50%

Money market fund

$108,800

($7,800)

$0

$0

$101,000

10%

Total

$532,000

($27,000)

$518,000

($13,000)

$1,010,000

100%

Rebalancing and asset allocation cannot ensure a profit, protect against losses, or guarantee that an investor’s goal will be met.

If you’re a Schwab client, you can schedule a personal retirement consultation to discuss your situation. Call 877-673-7970.

Allocate your money.

Set aside a year’s worth of cash.

Use a checking or savings account.

Arrange to have Social Security checks and other income automatically deposited into a bank account.

From Schwab Bank

Open an FDIC-insured Schwab Bank High Yield Investor Checking® or Schwab Bank High Yield Investor Savings® account. With unlimited ATM fee rebates, these accounts can help you save. Call 888-403-9000 for more details.

Build your portfolio.

Choose investments for your portfolio that are suitable for your income needs and your risk profile.

Within your retirement portfolio, create a short-term reserve.

Plan your withdrawals.

Pay expenses from your paycheck account.

Withdraw interest and dividends from your main portfolio.

Ask us to turn off automatic reinvestment of your interest and dividends. Call 800-435-4000.

Withdraw principal from your short-term reserve.

Replenish your reserve first with principal from maturing bonds.

Then, replenish your reserve with proceeds from rebalancing.

Consolidate your retirement savings at Schwab to make managing retirement income easier.
Call an Account Transfer Specialist at 866-232-9890.

Ask a Rollover Consultant to help you move a 401(k) to Schwab. Call 866-855-9095.

NOTE: Before initiating a rollover, carefully consider all of your available options, which may include, but not be limited to, keeping your assets in your former employer’s plan, rolling over assets to a new employer’s plan, or taking a cash distribution (taxes and possible withdrawal penalties may apply). Prior to a decision, be sure to understand the benefits and limitations of your available options and consider factors such as differences in investment-related expenses, plan or account fees, available investment options, distribution options, legal and creditor protections, the availability of loan provisions, tax treatment, and other concerns specific to your individual circumstances.

You are leaving Schwab.com and accessing a third-party website that is not affiliated with Charles
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or services offered on the site.

Here’s a quick way to estimate living expenses: Living expenses = What you earn now (−) What you save now

While one school of thought states that you’ll need 75%–80% of your current income when you retire, it may be safer to assume that you’ll need roughly the same annual income you have now minus what you’ve been saving. Why? While certain costs, such as mortgage payments or work-related expenses, may go down, others, such as travel, entertainment, and health care, may go up. And often there are unanticipated expenses for emergencies, which you can fund with a short-term reserve or build into your budget.

Knowing what’s essential and what’s discretionary can help you with your income planning. To cover essential expenses, consider investments that produce predictable income, such as annuities with lifetime income guarantees.* Discretionary expenses could be covered by income that is more variable—income from investments that provide some income now plus growth potential for the future.*Guarantees are subject to the claims-paying ability of the insurance company that issues the annuity.

You might start by selling overweight assets from taxable accounts in this order:

Need help planning for retirement?

1. Source: “What Role Should Fixed Income Play in Your Retirement Portfolio?” by Rob Williams, February 5, 2010.

2. Unlimited ATM fee rebates apply to cash withdrawals using the Schwab Bank Visa Platinum check card wherever it is accepted. ATM fee rebates do not apply to any fees other than fees assessed for using an ATM to withdraw cash from your Schwab Bank account. Schwab Bank makes its best effort to identify those ATM fees eligible for rebate, based on information it receives from Visa and ATM operators. In the event that you have not received a rebate for a fee that you believe is eligible, please call a Schwab Bank Client Service Specialist for assistance at 888-403-9000. Schwab Bank reserves the right to modify or discontinue the ATM fee rebate at any time.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

Important information about investment income.

Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by calling 800-435-4000. Please read the prospectus carefully before investing.

An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the fund.

Fixed income securities are subject to increased loss of principal during periods of rising interest rates. Fixed income investments are subject to various other risks, including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. All of these factors can subject the funds to increased loss of principal.

Interest and dividend income is subject to fluctuation and is not guaranteed. Principal is subject to market devaluation, and your investments could lose money.

Income from investments, withdrawals from investment accounts, and proceeds from investment sales may be taxable. You may want to consult with a tax advisor.

Please refer to the ThomasPartners® Form ADV, Part 2A, for more information.

The ThomasPartners Dividend Growth Strategies are available through managed account programs sponsored by Schwab. Program fees may vary. There are two versions of the ThomasPartners Dividend Growth investment philosophy: ThomasPartners Dividend Growth Strategy (K-1 Generating) has direct exposure to master limited partnerships (MLPs) and generates IRS Schedule K-1 tax forms. The other version, ThomasPartners Dividend Growth Strategy (Non-K-1 Generating), uses exchange-traded funds (ETFs) to provide exposure to MLPs and therefore does not generate IRS Schedule K-1 tax forms. Please read Schwab's applicable disclosure brochure for important information and disclosures. Schwab makes available other equity strategies in its managed account programs that focus on dividend-paying stocks, including strategies that are managed by firms that are unaffiliated with Schwab. Because Schwab and ThomasPartners are affiliates, Schwab and its affiliates generate more combined revenue if you choose ThomasPartners than if you choose an unaffiliated manager with a similar strategy.

The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice.

The investment strategies mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Examples provided are for illustrative (or informational) purposes only and are not intended to be reflective of results you can expect to achieve.

Brokerage and Insurance products:
•Are not deposits
•Are not FDIC-insured
•Are not insured by any federal government agency
•Are not guaranteed by the bank or affiliates of the bank
•May lose value